WB urges more local financing resources

JAKARTA (JP): World Bank managing director Sven Strom urged Indonesia on Tuesday to seek additional domestic resources to finance the 2000/2001 state budget and not count on additional loans from the bank.

He said the bank would assist the government in "finding ways" to secure more domestic financing resources.

"This includes additional resources from privatization programs and other means," he said after attending a meeting between the government and representatives of Indonesia's major donors, which are grouped under the Consultative Group on Indonesia (CGI).

The CGI donor grouping, which is under the chairmanship of the World Bank, will convene on July 27 in Paris for two days of talks to decide on a new loan commitment for the crisis-hit country.

Several government officials have said recently Indonesia might not be able to obtain loan commitments of the same amount as last year's pledge because the World Bank and the Asian Development Bank had a heavy loan exposure to the country.

But Strom said the bank was able to provide Indonesia with a similar loan commitment to previous years -- about US$1.5 billion each year.

"But the question is, is it necessary or not.

"The important thing is how to help Indonesia in increasing domestic resources," he said.

Indonesia received $7.9 billion from CGI last year.

Deputy for international cooperation at the National Development Planning Board (Bappenas) Budhy Tjahjati said last week the multilateral and bilateral donors had indicated they might provide $4.72 billion in new loan commitments. He said the commitments included $1.5 billion from the World Bank and $1.2 billion from the ADB at the upcoming CGI meeting. But she said the figure was an initial estimate only from preliminary talks with the lenders.

Separately, chairman of Bappenas Boediono said on Tuesday that among the issues to be discussed at the upcoming CGI meeting would be efforts on how to finance the 2000/2001 state budget.

He said talks would focus on how to maximize tax revenue, generate revenue from privatization, minimize subsidies and the recovery of nonperforming loans (NPLs) and other assets under the Indonesian Bank Restructuring Agency (IBRA).

Boediono said the matter of whether Indonesia needed to request another sovereign debt rescheduling facility under the auspices of the Paris Club of creditor nations would also be addressed.

"The understanding and support of CGI on how to bridge the financing gap is very important. The 2000/2001 state budget is expected to be difficult due to the heavy burden of the bank recapitalization costs," Boediono said.

Strom concurred, saying the recovery of NPLs and the sale of other assets under IBRA would therefore be very important in meeting the recapitalization costs.

IBRA is currently in control of approximately Rp 600 trillion in various assets, including some Rp 230 trillion in NPLs transferred from the country's major banks, particularly those which joined the government-sponsored bank recapitalization program. The agency plans to sell the assets, restructure the NPLs, or take litigation measures against bad debtors.

Strom said the donors had urged the country to speed up the bank and corporate restructuring programs.

"There was agreement that while the reforms, and a peaceful election, seem to have signaled a return of confidence, and with it, signs of recovery, that situation remains fragile. The reform program needs to be continued, and in some cases sped up."

Strom said Indonesia's major political leaders, including presidential hopeful Megawati Soekarnoputri, agreed on the need to speed up the reform program.

He also said there was a need to speed up anticorruption programs.

Several non-governmental organizations (NGOs) earlier called on the government and the World Bank to delay the upcoming CGI meeting until Indonesia had formed a new government. The NGOs also criticized both the government and the bank for not seriously tackling rampant corruption in the country.

However, the government and the World Bank have both said the CGI meeting will go ahead as scheduled.

The country held an election on June 7 to elect new representatives to the People's Consultative Assembly (MPR).

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said ahead of a limited Cabinet meeting that new loan commitments from the donors would help further strengthen confidence in the economy.

Sources said most of the $10.3 billion foreign loans needed for the 1999/2000 fiscal year ending next March were secured, with the government needing only about $1.9 billion more to fill the financing gap. (rei/prb)